Item 1. Business

GENERAL

CMS Energy

CMS Energy was formed as a corporation in Michigan in 1987 and is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and CMS Enterprises, primarily a domestic independent power producer. Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, metal, and food products industries, as well as a diversified group of other industries. CMS Enterprises, through its subsidiaries and equity investments, is engaged primarily in independent power production and owns power generation facilities fueled mostly by natural gas and renewable sources.

CMS Energy manages its businesses by the nature of services each provides, and operates principally in three business segments: electric utility, gas utility, and enterprises, its non-utility operations and investments. Consumers’ consolidated operations account for the substantial majority of CMS Energy’s total assets, income, and operating revenue. CMS Energy’s consolidated operating revenue was $6.4 billion in 2016, $6.5 billion in 2015, and $7.2 billion in 2014.

For further information about operating revenue, income, and assets and liabilities attributable to all of CMS Energy’s business segments and operations, see Item 8. Financial Statements and Supplementary Data—CMS Energy Selected Financial Information, CMS Energy Consolidated Financial Statements, and Notes to the Consolidated Financial Statements.

Consumers

Consumers has served Michigan customers since 1886. Consumers was incorporated in Maine in 1910 and became a Michigan corporation in 1968. Consumers owns and operates electric generation, transmission, and distribution facilities and gas transmission, storage, and distribution facilities. It provides electricity and/or natural gas to 6.7 million of Michigan’s 10 million residents. Consumers’ rates and certain other aspects of its business are subject to the jurisdiction of the MPSC and FERC, as well as to NERC reliability standards, as described in “CMS Energy and Consumers Regulation” in this Item 1.

Consumers’ consolidated operating revenue was $6.1 billion in 2016, $6.2 billion in 2015, and $6.8 billion in 2014. For further information about operating revenue, income, and assets and liabilities attributable to Consumers’ electric and gas utility operations, see Item 8. Financial Statements and Supplementary Data—Consumers Selected Financial Information, Consumers Consolidated Financial Statements, and Notes to the Consolidated Financial Statements.

Consumers owns its principal properties in fee, except that most electric lines and gas mains are located below or adjacent to public roads or on land owned by others and are accessed by Consumers through easements and other rights. Almost all of Consumers’ properties are subject to the lien of its First Mortgage Bond Indenture. For additional information on Consumers’ properties, see Item 1. Business—Business Segments—Consumers Electric Utility—Electric Utility Properties and Consumers Gas Utility—Gas Utility Properties.

In 2016, Consumers served 1.8 million electric customers and 1.8 million gas customers in Michigan’s Lower Peninsula. Presented in the following map are Consumers’ service territories:

	Electric Service Territory
	Gas Service Territory
	Combination Electric and Gas Service Territory
•	Electric Generation Facilities

BUSINESS SEGMENTS

Consumers Electric Utility

Electric Utility Operations: Consumers’ electric utility operations, which include the generation, purchase, transmission, distribution, and sale of electricity, generated operating revenue of $4.4 billion in 2016, $4.2 billion in 2015, and $4.4 billion in 2014. Consumers’ electric utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

Presented in the following illustration is Consumers’ 2016 electric utility operating revenue of $4.4 billion by customer class:

	Residential (45%)
	Commercial (31%)
	Industrial (18%)
	Other (6%)

Consumers’ electric utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.

In 2016, Consumers’ electric deliveries were 38 billion kWh, which included ROA deliveries of four billion kWh, resulting in net bundled sales of 34 billion kWh. In 2015, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of four billion kWh, resulting in net bundled sales of 33 billion kWh.

Consumers’ electric utility operations are seasonal. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment.

Presented in the following illustration are Consumers’ monthly weather-adjusted electric deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including ROA deliveries, during 2016 and 2015:

Consumers’ 2016 summer peak demand was 8,227 MW, which included ROA demand of 592 MW. For the 2015-2016 winter season, Consumers’ peak demand was 5,750 MW, which included ROA demand of 480 MW. As required by MISO reserve margin requirements, Consumers owns or controls, through long-term PPAs and short-term capacity purchases, essentially all of the capacity required to supply its projected firm peak load and necessary reserve margin for summer 2017.

Electric Utility Properties: Consumers’ transmission and distribution systems consist of:

· 214 miles of transmission overhead lines operating at 138 kilovolts

· 188 miles of high-voltage distribution overhead lines operating at 138 kilovolts

· four miles of high-voltage distribution underground lines operating at 138 kilovolts

· 4,430 miles of high-voltage distribution overhead lines operating at 46 kilovolts and 69 kilovolts

· 19 miles of high-voltage distribution underground lines operating at 46 kilovolts

· 56,067 miles of electric distribution overhead lines

· 10,532 miles of underground distribution lines

· substations with an aggregate transformer capacity of 25 million kVA

Consumers is interconnected to the interstate high-voltage electric transmission system owned by METC and operated by MISO. Consumers is also interconnected to neighboring utilities and to other transmission systems.

Presented in the following table are details about Consumers’ electric generating system at December 31, 2016:

		Number of Units and		2016 Generation Capacity	1	2016 Electric Supply
Name and Location (Michigan)		Year Entered Service		(MW)		(GWh)
Coal generation
J.H. Campbell 1 & 2 – West Olive		2 Units, 1962-1967		610		2,828
J.H. Campbell 3 – West Olive2		1 Unit, 1980		755		3,353
B.C. Cobb 4 & 5 – Muskegon3		2 Units, 1956-1957		-		556
D.E. Karn 1 & 2 – Essexville		2 Units, 1959-1961		494		2,164
J.C. Weadock 7 & 8 – Essexville3		2 Units, 1955-1958		-		418
J.R. Whiting 1-3 – Erie3		3 Units, 1952-1953		-		420
Total coal generation				1,859		9,739
Oil/Gas steam generation
Jackson – Jackson		1 Unit, 2002		542		2,118
D.E. Karn 3 & 4 – Essexville		2 Units, 1975-1977		1,208		81
Zeeland (combined cycle) – Zeeland		3 Units, 2002		527		3,692
Total oil/gas steam generation				2,277		5,891
Hydroelectric
Ludington – Ludington		6 Units, 1973		1,035	4	(316	)5
Conventional hydro generation – various locations		35 Units, 1906-1949		75		452
Total hydroelectric				1,110		136
Gas/Oil combustion turbine
Zeeland (simple cycle) – Zeeland		2 Units, 2001		316		309
Various plants – various locations6		8 Units, 1966-1971		46		2
Total gas/oil combustion turbine				362		311
Wind generation
Cross Winds® Energy Park – Tuscola County		62 Turbines, 2014		16		373
Lake Winds® Energy Park – Mason County		56 Turbines, 2012		18		254
Total wind generation				34		627
Solar generation
Solar Gardens
Grand Valley State University – Allendale		11,200 Panels, 2016		1		4
Western Michigan University – Kalamazoo		3,900 Panels, 2016		-		-
Total solar generation				1		4
Total owned generation				5,643		16,708
Purchased and interchange power7				2,688	8	19,495	8
Total supply				8,331		36,203
Generation and transmission use/loss						2,186
Total net bundled sales						34,017

1 Represents each plant’s electric generation capacity during the summer months, except for Solar Gardens Western Michigan University — Kalamazoo, which began operations in August 2016.

2 Represents Consumers’ share of the capacity of the J.H. Campbell 3 unit, net of the 6.69-percent ownership interest of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc.

3 Consumers retired these seven smaller coal-fueled generating units in April 2016.

4 Represents Consumers’ 51-percent share of the capacity of Ludington. DTE Electric holds the remaining 49-percent ownership interest.

5 Represents Consumers’ share of net pumped-storage generation. The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak-demand hours.

6 Includes units that were mothballed beginning on various dates between October 2010 and October 2014.

7 Includes purchases under long-term PPAs and from the MISO capacity and energy markets.

8 Includes 1,240 MW of purchased generation capacity and 4,924 GWh of purchased electricity from the MCV Facility and 751 MW of purchased generation capacity and 6,927 GWh of purchased electricity from Palisades. In December 2016, Consumers and Entergy reached an agreement to terminate the Palisades PPA in May 2018, subject to timely receipt of certain MPSC approvals.

Consumers’ generation capacity is a measure of the maximum electric output that Consumers has available to meet peak load requirements. As shown in the following illustration, Consumers’ 2016 generation capacity of 8,331 MW, including purchased capacity of 2,688 MW, relied on a variety of fuel sources:

	Gas (41%)
	Coal (23%)
	Pumped Storage (12%)
	Oil (10%)
	Nuclear (9%)
	Renewables (5%)

Electric Utility Supply: Presented in the following table are the sources of Consumers’ electric supply over the last five years:

										GWh
Years Ended December 31		2016		2015		2014		2013		2012
Owned generation
Coal		9,739		15,833		15,684		15,951		14,027
Gas		6,194		3,601		2,012		1,415		3,003
Renewable energy		1,083		1,056		748		704		433
Oil		8		-		-		4		6
Net pumped storage1		(316	)	(186	)	(300	)	(371	)	(295	)
Total owned generation		16,708		20,304		18,144		17,703		17,174
Purchased and interchange power
Purchased renewable energy2		2,229		2,163		2,366		2,250		1,435
Purchased generation — other2		13,578		11,720		10,073		10,871		13,104
Net interchange power3		3,688		1,327		4,793		3,656		4,151
Total purchased and interchange power		19,495		15,210		17,232		16,777		18,690
Total supply		36,203		35,514		35,376		34,480		35,864

1 Represents Consumers’ share of net pumped-storage generation. The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak-demand hours.

2 Includes purchases under long-term PPAs.

3 Includes purchases from the MISO energy market.

During 2016, Consumers acquired 54 percent of the electricity it provided to customers through long-term PPAs and the MISO energy market. Consumers offers its generation into the MISO energy market on a day-ahead and real-time basis and bids for power in the market to serve the demand of its customers. Consumers is a net purchaser of power and supplements its generation capability with purchases from the MISO energy market to meet its customers’ needs during peak demand periods.

At December 31, 2016, Consumers had unrecognized future commitments (amounts for which, in accordance with GAAP, liabilities have not been recorded on its balance sheet) to purchase capacity and energy under long-term PPAs with various generating plants. These contracts require monthly capacity payments based on the plants’ availability or deliverability. The payments for 2017 through 2036 are estimated to total $9 billion and, for each of the next five years, $1 billion annually. These amounts may vary depending on plant availability and fuel costs. For further information about Consumers’ future capacity and energy purchase obligations, see Item 8. Financial Statements and Supplementary Data—MD&A—Capital Resources and Liquidity and Note 4, Contingencies and Commitments—Contractual Commitments.

During 2016, 27 percent of the energy Consumers provided to customers was generated by its coal-fueled generating units, which burned six million tons of coal and produced a combined total of 9,739 GWh of electricity. This percentage includes seven smaller coal-fueled generating units that Consumers retired in April 2016 and that represented four percent of the energy provided to customers in 2016.

In order to obtain the coal it needs, Consumers enters into physical coal supply contracts. At December 31, 2016, Consumers had contracts to purchase coal through 2019; payment obligations under these contracts totaled $96 million. Most of Consumers’ rail-supplied coal contracts have fixed prices, although some contain market-based pricing. Consumers’ vessel-supplied coal contracts have fixed base prices that are adjusted monthly to reflect changes to the fuel cost of vessel transportation. At

December 31, 2016, Consumers had 86 percent of its 2017 expected coal requirements under contract, as well as a 37-day supply of coal on hand.

In conjunction with its coal supply contracts, Consumers leases a fleet of rail cars and has transportation contracts with various companies to provide rail and vessel services for delivery of purchased coal to Consumers’ generating facilities. Consumers’ coal transportation contracts expire on various dates from 2017 through 2019; payment obligations under these contracts totaled $259 million at December 31, 2016.

During 2016, 17 percent of the energy Consumers provided to customers was generated by natural gas-fueled generating units, which burned 45 bcf of natural gas and produced a combined total of 6,194 GWh of electricity.

In order to obtain the gas it needs for electric generation fuel, Consumers’ electric utility purchases gas from the market near the time of consumption, at prices that allow it to compete in the electric wholesale market. For units 3 and 4 of D.E. Karn and for the Jackson and Zeeland plants, Consumers utilizes an agent that owns firm transportation rights to each plant to purchase gas from the market and transport the gas to the facilities. For its smaller combustion turbines, Consumers’ electric utility purchases and transports gas to its facilities as a bundled-rate tariff customer of either the gas utility or DTE Gas.

Presented in the following table is the cost per million Btu of all fuels consumed, which fluctuates with the mix of fuel used.

Cost Per Million Btu
Years Ended December 31		2016			2015			2014			2013			2012
Coal		$	2.40		$	2.49		$	2.72		$	2.90		$	2.98
Gas		2.93			3.06			7.19			4.68			3.16
Oil		9.98			12.28			20.16			19.47			19.08
Weighted-average fuel cost		$	2.60		$	2.59		$	3.17		$	3.07		$	3.05

Electric Utility Competition: Consumers’ electric utility business is subject to actual and potential competition from many sources, in both the wholesale and retail markets, as well as in electric generation, electric delivery, and retail services.

Under existing Michigan law, electric customers in Consumers’ service territory are allowed to buy electric generation service from alternative electric suppliers in an aggregate amount up to ten percent of Consumers’ weather-adjusted retail sales for the preceding calendar year. At December 31, 2016, electric deliveries under the ROA program were at the ten-percent limit. Of Consumers’ 1.8 million electric customers, 305 customers, or 0.02 percent, purchased generation service under the ROA program. The 2016 Energy Law, which will become effective in April 2017, retains the ten-percent cap on ROA, with certain exceptions. For additional information see Item 8. Financial Statements and Supplementary Data—MD&A—Outlook—Consumers Electric Utility Outlook and Uncertainties.

Consumers also faces competition or potential competition associated with industrial customers relocating all or a portion of their production capacity outside of Consumers’ service territory for economic reasons; municipalities owning or operating competing electric delivery systems; and customer self-generation. Consumers addresses this competition in various ways, including:

· aggressively controlling operating, maintenance, and fuel costs and passing savings on to customers

· providing competitive rate-design options, particularly for large energy-intensive customers

· offering tariff-based incentives that support economic development

· providing non-energy services and value to customers

· monitoring activity in adjacent geographical areas

Consumers Gas Utility

Gas Utility Operations: Consumers’ gas utility operations, which include the purchase, transmission, storage, distribution, and sale of natural gas, generated operating revenue of $1.7 billion in 2016, $1.9 billion in 2015, and $2.4 billion in 2014. Consumers’ gas utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

Presented in the following illustration is Consumers’ 2016 gas utility operating revenue of $1.7 billion by customer class:

	Residential (58%)
	GCC (21%)
	Commercial (11%)
	Industrial (4%)
	Other (6%)

Consumers’ gas utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.

In 2016, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system transportation deliveries, totaled 358 bcf, which included GCC deliveries of 46 bcf. In 2015, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 356 bcf, which included GCC deliveries of 57 bcf. Consumers’ gas utility operations are seasonal. Consumers injects natural gas into storage during the summer months for use during the winter months when the demand for natural gas is higher. Peak demand occurs in the winter due to colder temperatures and the resulting use of natural gas as a heating fuel. During 2016, 48 percent of the natural gas supplied to all customers during the winter months was supplied from storage.

Presented in the following illustration are Consumers’ monthly weather-adjusted gas deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including GCC deliveries, during 2016 and 2015:

Gas Utility Properties: Consumers’ gas transmission, storage, and distribution system consists of:

· 1,670 miles of transmission lines

· 15 gas storage fields with a total storage capacity of 309 bcf and a working gas volume of 151 bcf

· 27,920 miles of distribution mains

· eight compressor stations with a total of 166,474 installed and available horsepower

Gas Utility Supply: In 2016, Consumers purchased 73 percent of the gas it delivered from U.S. producers and five percent from Canadian producers. The remaining 22 percent was purchased from authorized GCC suppliers and delivered by Consumers to customers in the GCC program. Presented in the following illustration are the supply arrangements for the gas Consumers delivered to GCC and GCR customers during 2016:

	GCR firm city-gate contracts (44%)
	GCR firm gas transportation contracts (34%)
	GCC suppliers (22%)

Firm gas transportation or firm city-gate contracts are those that define a fixed amount, price, and delivery time frame. Consumers’ firm gas transportation contracts are with ANR Pipeline Company, Great Lakes Gas Transmission Limited Partnership, Panhandle Eastern Pipe Line Company, and Trunkline Gas Company, LLC, each a non-affiliated company. Under these contracts, Consumers purchases and transports gas to Michigan for ultimate delivery to its customers. Consumers’ firm gas transportation contracts expire on various dates from 2017 through 2023 and provide for the delivery of 39 percent of Consumers’ total gas supply requirements in 2017. Consumers purchases the balance of its required gas supply under firm city-gate contracts and through authorized suppliers under the GCC program.

Gas Utility Competition: Competition exists in various aspects of Consumers’ gas utility business. Competition comes from GCC and from alternative fuels and energy sources, such as propane, oil, and electricity.

Enterprises Segment—Non-Utility Operations and Investments

CMS Energy’s enterprises segment, through various subsidiaries and certain equity investments, is engaged primarily in domestic independent power production, the marketing of independent power production, and the development of renewable generation. The enterprises segment’s operating revenue was $215 million in 2016, $190 million in 2015, and $299 million in 2014.

Independent Power Production: At December 31, 2016, CMS Energy had ownership interests in independent power plants totaling 1,177 MW or 1,077 net MW. (Net MW reflects that portion of the capacity relating to CMS Energy’s ownership interests.) Presented in the following table are CMS Energy’s interests in independent power plants at December 31, 2016:

		Ownership		Primary		Gross Capacity	1	2016 Net Generation
Location		Interest (%)		Fuel Type		(MW)		(GWh)
Dearborn, Michigan		100		Natural gas		752		4,878
Gaylord, Michigan		100		Natural gas		156		4
Comstock, Michigan		100		Natural gas		68		3
Filer City, Michigan		50		Coal and biomass		73		506
New Bern, North Carolina		50		Biomass		50		323
Flint, Michigan		50		Biomass		40		110
Grayling, Michigan		50		Biomass		38		130
Total						1,177		5,954

1 Represents the intended full-load sustained output of each plant.

The operating revenue from independent power production was $16 million in 2016, $17 million in 2015, and $18 million in 2014.

Energy Resource Management: CMS ERM purchases and sells energy commodities in support of CMS Energy’s generating facilities with a focus on optimizing CMS Energy’s independent power production portfolio. In 2016, CMS ERM marketed seven bcf of natural gas and 5,906 GWh of electricity. Electricity marketed by CMS ERM was generated by independent power production of the enterprises segment and by unrelated third parties. CMS ERM’s operating revenue was $199 million in 2016, $173 million in 2015, and $281 million in 2014.

Enterprises Segment Competition: The enterprises segment competes with other independent power producers. The needs of this market are driven by electric demand and the generation available.

Other Businesses

EnerBank: EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans for financing home improvements. EnerBank’s operating revenue was $120 million in 2016, $101 million in 2015, and $80 million in 2014.

CMS ENERGY AND CONSUMERS REGULATION

CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, and local governmental agencies, including those described in the following sections.

FERC and NERC

FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale generators in which CMS Enterprises has ownership interests, as well as over CMS ERM, CMS Gas Transmission, and DIG. FERC’s jurisdiction includes, among other things, acquisitions, operations, disposals of certain assets and facilities, services provided and rates charged, and conduct among affiliates. FERC also has limited jurisdiction over holding company matters with respect to CMS Energy. FERC, in connection with NERC and with regional reliability organizations, also regulates generation and transmission owners and operators, load serving entities, purchase and sale entities, and others with regard to reliability of the bulk power system.

FERC regulates limited aspects of Consumers’ gas business, principally compliance with FERC capacity release rules, shipping rules, the prohibition against certain buy/sell transactions, and the price-reporting rule.

FERC also regulates certain aspects of Consumers’ electric operations, including compliance with FERC accounting rules, wholesale and transmission rates, operation of licensed hydroelectric generating plants, transfers of certain facilities, corporate mergers, and issuances of securities.

MPSC

Consumers is subject to the jurisdiction of the MPSC, which regulates public utilities in Michigan with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, corporate mergers, and other matters.

The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders.

Rate Proceedings: For information regarding open rate proceedings, see Item 8. Financial Statements and Supplementary Data—MD&A—Outlook and Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.

Other Regulation

The U.S. Secretary of Energy regulates imports and exports of natural gas and has delegated various aspects of this jurisdiction to FERC and the U.S. Department of Energy’s Office of Fossil Fuels.

The U.S. Department of Transportation Office of Pipeline Safety regulates the safety and security of gas pipelines through the Natural Gas Pipeline Safety Act of 1968 and subsequent laws.

EnerBank is regulated by the Utah Department of Financial Institutions and the FDIC.

Energy Legislation

In December 2016, Michigan’s governor signed the 2016 Energy Law, which will become effective in April 2017. Among other things, the 2016 Energy Law:

· raises the renewable energy standard from the present ten-percent requirement to 12.5 percent by 2019 and 15 percent by 2021

· establishes a goal of 35 percent combined renewable energy and energy waste reduction by 2025

· authorizes incentives for demand response programs and expands existing incentives for energy efficiency programs

· authorizes incentives for new PPAs with non-affiliates

· establishes an integrated planning process for new generation resources

· shortens from twelve months to ten months the time by which the MPSC must issue a final order in general rate cases, but prohibits electric and gas utilities from filing general rate cases for increases in rates more often than once every twelve months

· eliminates utilities’ self-implementation of rates under general rate cases

· requires the MPSC to implement equitable cost-of-service rates for customers participating in a net metering program

The 2016 Energy Law also establishes a path to ensure that forward capacity is secured for all electric customers in Michigan, including customers served by alternative electric suppliers under ROA. Under existing Michigan law, electric customers in Consumers’ service territory are allowed to buy electric generation service from alternative electric suppliers in an aggregate amount up to ten percent of Consumers’ weather-adjusted retail sales for the preceding calendar year. For additional information see Item 8. Financial Statements and Supplementary Data—MD&A—Outlook—Consumers Electric Utility Outlook and Uncertainties.

CMS ENERGY AND CONSUMERS ENVIRONMENTAL COMPLIANCE

CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local regulations for environmental quality, including air and water quality, solid waste management, and other matters. Consumers expects to recover costs to comply with environmental regulations in customer rates, but cannot guarantee this result. For additional information concerning environmental matters, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments and Note 11, Asset Retirement Obligations.

CMS Energy has recorded a $51 million liability for its subsidiaries’ obligations associated with Bay Harbor and Consumers has recorded a $107 million liability for its obligations at a number of MGP sites. For additional information, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments.

Air: Consumers continues to install state-of-the-art emissions control equipment at its electric generating plants. Consumers estimates that it will incur capital expenditures of $22 million from 2017 through 2021 to comply with present and future federal and state environmental regulations that require extensive reductions in nitrogen oxides, sulfur dioxides, particulate matter, and mercury emissions. Consumers’ estimate may increase or decrease depending on future legislation or rulemaking, including regulations regarding greenhouse gases, that could become either more or less stringent.

Solid Waste Disposal: Costs related to the construction, operation, and closure of solid waste disposal facilities for coal ash are significant. Consumers’ solid waste disposal areas are regulated under Michigan’s solid waste rules. In April 2015, the EPA published a final rule regulating CCRs, such as coal ash, under RCRA. The final rule adopts minimum standards for beneficially reusing and disposing of non-hazardous CCRs. The rule establishes new minimum requirements for site location, groundwater monitoring, flood protection, storm water design, fugitive dust control, and public disclosure of information. The rule also sets out conditions under which CCR units would be forced to cease receiving CCR and non-CCR waste and initiate closure based on the inability to achieve minimum safety standards, meet a location standard, or meet minimum groundwater standards. Consumers has converted all of its fly ash handling systems to dry systems to minimize applicable requirements. In addition, all of Consumers’ ash facilities have programs designed to protect the environment and are subject to quarterly MDEQ inspections. Consumers’ preliminary estimate of capital and cost of removal expenditures to comply with regulations relating to ash disposal is $255 million from 2017 through 2021.

Water: Consumers uses substantial amounts of water to operate and cool its electric generating plants. Water discharge quality is regulated and administered by the MDEQ under the federal NPDES program. To comply with such regulation, Consumers’ facilities have discharge monitoring programs. The EPA issued final regulations for wastewater discharges from electric generating plants in 2015. Consumers’ preliminary estimate of capital expenditures to comply with these regulations is $109 million from 2017 through 2021.

In 2014, the EPA finalized its cooling water intake rule, which requires Consumers to evaluate the biological impact of its cooling water intake systems and ensure that it is using the best technology

available to minimize adverse environmental impacts. Consumers’ preliminary estimate of capital expenditures to comply with these regulations is $62 million from 2017 through 2021.

For further information concerning estimated capital expenditures related to air, solid waste disposal, and water see Item 8. Financial Statements and Supplementary Data—MD&A—Outlook—Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.

INSURANCE

CMS Energy and its subsidiaries, including Consumers, maintain insurance coverage generally similar to comparable companies in the same lines of business. The insurance policies are subject to terms, conditions, limitations, and exclusions that might not fully compensate CMS Energy or Consumers for all losses. A portion of each loss is generally assumed by CMS Energy or Consumers in the form of deductibles and self-insured retentions that, in some cases, are substantial. As CMS Energy or Consumers renews its policies, it is possible that some of the present insurance coverage may not be renewed or obtainable on commercially reasonable terms due to restrictive insurance markets.

CMS Energy’s and Consumers’ present insurance program does not cover the risks of certain environmental costs, such as the cleanup of sites owned by CMS Energy or Consumers, or claims for the long-term storage or disposal of pollutants or for air pollution.

EMPLOYEES

Presented in the following table are the number of employees of CMS Energy and Consumers:

December 31		2016		2015		2014
CMS Energy, including Consumers1
Full-time employees		7,699		7,711		7,671
Seasonal employees2		52		39		33
Part-time employees		49		54		43
Total employees		7,800		7,804		7,747
Consumers1
Full-time employees		7,301		7,339		7,336
Seasonal employees2		52		39		33
Part-time employees		13		16		19
Total employees		7,366		7,394		7,388

1 For information about CMS Energy’s and Consumers’ collective bargaining agreements, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12, Retirement Benefits.

2 Consumers’ seasonal workforce peaked at 522 employees during 2016, 477 employees during 2015, and 394 employees during 2014. Seasonal employees work primarily during the construction season and are subject to yearly layoffs.

CMS ENERGY AND CONSUMERS EXECUTIVE OFFICERS

Presented in the following table are the company positions held during the last five years for each of CMS Energy’s and Consumers’ executive officers as of February 1, 2017:

Name, Age, Position(s)		Period
Patricia K. Poppe (age 48)
CMS Energy
President and CEO		7/2016 – Present
Director		5/2016 – Present
Senior Vice President		3/2015 – 7/2016
Consumers
President and CEO		7/2016 – Present
Director		5/2016 – Present
Senior Vice President		3/2015 – 7/2016
Vice President		1/2011 – 3/2015
CMS Enterprises
Chairman of the Board, President, CEO and Director		7/2016 – Present
Thomas J. Webb (age 64)
CMS Energy
Executive Vice President and CFO		8/2002 – Present
Consumers
Executive Vice President and CFO		8/2002 – Present
CMS Enterprises
Executive Vice President, CFO, and Director		8/2002 – Present
John M. Butler (age 52)
CMS Energy
Senior Vice President		7/2006 – Present
Consumers
Senior Vice President		7/2006 – Present
CMS Enterprises
Senior Vice President		9/2006 – Present
Daniel J. Malone (age 56)
CMS Energy
Senior Vice President		3/2015 – Present
Consumers
Senior Vice President		5/2010 – Present
David G. Mengebier (age 59)
CMS Energy
Senior Vice President		11/2006 – Present
Chief Compliance Officer		11/2006 – 1/2016
Consumers
Senior Vice President		11/2006 – Present
Chief Compliance Officer		11/2006 – 1/2016
CMS Enterprises
Senior Vice President		3/2003 – Present

Name, Age, Position(s)		Period
Venkat Dhenuvakonda Rao (age 46)
CMS Energy
Senior Vice President		9/2016 – Present
Vice President		7/2012 – 9/2016
Executive Director of Financial Planning and Forecasting		2/2009 – 7/2012
Consumers
Senior Vice President		9/2016 – Present
Vice President		7/2012 – 9/2016
Executive Director of Financial Planning and Forecasting		2/2009 – 7/2012
CMS Enterprises
Senior Vice President		9/2016 – Present
Vice President		7/2012 – 9/2016
Catherine M. Reynolds (age 59)
CMS Energy
Senior Vice President and General Counsel		10/2013 – Present
Vice President, Deputy General Counsel, and Corporate Secretary		1/2012 – 10/2013
Vice President and Corporate Secretary		9/2006 – 1/2012
Consumers
Senior Vice President and General Counsel		10/2013 – Present
Vice President, Deputy General Counsel, and Corporate Secretary		1/2012 – 10/2013
Vice President and Corporate Secretary		9/2006 – 1/2012
CMS Enterprises
Senior Vice President, General Counsel, and Director		1/2014 – Present
Vice President and Secretary		9/2006 – 1/2014
Glenn P. Barba (age 51)
CMS Energy
Vice President, Controller, and CAO		2/2003 – Present
Consumers
Vice President, Controller, and CAO		1/2003 – Present
CMS Enterprises
Vice President, Controller, and CAO		11/2007 – Present
**Brian F. Rich (age 42)**1
CMS Energy
Senior Vice President and Chief Information Officer		7/2016 – Present
Vice President and Chief Information Officer		7/2014 – 7/2016
Consumers
Senior Vice President and Chief Information Officer		7/2016 – Present
Vice President and Chief Information Officer		7/2014 – 7/2016
Garrick J. Rochow (age 42)
CMS Energy
Senior Vice President		7/2016 – Present
Vice President		3/2015 – 7/2016
Consumers
Senior Vice President		7/2016 – Present
Vice President		10/2010 – 7/2016

1 Prior to joining CMS Energy and Consumers, Mr. Rich was vice president of business technology for Pacific Gas and Electric Company, a non-affiliated company. Mr. Rich started with Pacific Gas and Electric Company in 2010.

There are no family relationships among executive officers and directors of CMS Energy or Consumers. The term of office of each of the executive officers extends to the first meeting of the Board of Directors of CMS Energy and Consumers after the next annual election of Directors of CMS Energy and Consumers (to be held on May 5, 2017).

AVAILABLE INFORMATION

CMS Energy’s internet address is www.cmsenergy.com. CMS Energy routinely posts important information on its website and considers the Investor Relations section, www.cmsenergy.com/investor-relations, a channel of distribution. Information contained on CMS Energy’s website is not incorporated herein. CMS Energy’s and Consumers’ annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act are accessible free of charge on CMS Energy’s website. These reports are available soon after they are electronically filed with the SEC. Also on CMS Energy’s website are:

· Corporate Governance Principles

· Articles of Incorporation

· Bylaws

· Charters and Codes of Conduct (including the Audit, Compensation and Human Resources, Finance, and Governance and Public Responsibility Committee Charters, as well as the Employee, Boards of Directors, EnerBank, and Third Party Codes of Conduct)

CMS Energy will provide this information in print to any stockholder who requests it.

Any materials CMS Energy files with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address is www.sec.gov.